Jeremy Warner: Informa swaps London for Zug in tax revolt

Outlook: Zug in central Switzerland, conveniently located within reach of some of the country's ritziest ski resorts, is no doubt a nice enough place for a visit. But is the publishing and events group Informa doing the right thing by relocating to this remote Swiss canton so as to avoid an estimated £10m a year in tax?

Informa is only the latest in a growing tax-driven exodus of UK listed companies from these shores. According to Peter Rigby, Informa's chief executive, the Government had the opportunity in the Budget to clear up any misunderstanding that might have arisen over tax on foreign dividends, but fluffed it. There was some movement in the right direction, but not enough. Double taxation of foreign profits remains a real possibility.

Informa generates around 80 per cent of its revenue overseas, so is peculiarly exposed to the UK Government's increasingly desperate hunt for new sources of taxation. The company calculates that the new rules on foreign profits would have raised its effective tax rate from the current 26-27 per cent to more like 31 per cent.

Ten million is ten million, and no amount of money is to be sneezed at in these straitened times. Yet you have to wonder whether it's really worth the hassle and the no doubt considerable advisory fees of moving off to Zug.

In little more than a year, the present government will be out, and though the incoming government's need for tax revenue will just as potent as this one's, it seems reasonable to assume that wiser counsel will prevail in time to stop the whole of corporate Britain decamping to Zug, Dublin or some such other supposedly more trustworthy tax regime.

Ten million will barely pay the expenses of regularly having to set up shop in Zug for board meetings. It also seems somewhat unlikely that this parochial, German-speaking, Catholic town is part of the zeitgeist of the events and trade press industry.

As with all the others who have chosen to up sticks and flee, Informa is being a bit silly about it. Yet behind the decision lies a serious point. Businesses like certainty, and as things stand they get very little of it from Her Majesty's Revenue and Customs. Instead, they are engaged in a constant cat-and-mouse game with an authority which seems determined to tighten the tax noose ever tighter round any potential source of income.

You can only squeeze the economy so far before the law of diminishing returns sets in. Trust in the British tax authorities is fast going down the drain, causing top decision-makers and wealth creators to vote with their feet and go somewhere else. The economy and its overall potential to create tax revenue is bound to be the poorer for it.

Britain urgently needs a national debate about what a modern corporate tax regime which reasonably balances the needs of enterprise and the state should look like. The present increasingly arbitrary and chiselling approach to taxation has potentially catastrophic consequences for a country that relies as much as this one on its attractions as a place for international business.